Town audit went well; some concerns cited

HARVARD -- Auditors Roselli, Clark & Associates reported to selectmen Tuesday night on the completed annual audit the accounting form performed for the town this year.

Offering an "overview" to begin with, Anthony Roselli told the board how the audit is done. "We go through the accounting records" of the various departments, with particular focus on the accounting side of town business, including the treasurer's office and tax collector. But they also looked at books the schools keep, since money changes hands.

As part of the job, the auditors also "sample" the accounts they scan for evidence of fraud, Roselli said, although the overall task isn't geared in that direction, and when grants are involved, the firm reports to appropriate agencies such as the Department of Revenue.

Impressive Scores

The town got "great grades on the financial side, "Roselli told the board, citing a "double-A" credit rating that's only one level below the top and a "standard metric" that has "trended up" to 13.3. Good news, he said, meaning revenues are ahead of forecasts.

Future Liability

Roselli said it's time for the town to start building up its retirement pay-off fund, a future responsibility that a working group - including Town Administrator Tim Bragan and Finance Director Lorraine Leonard - was formed to examine a couple of years ago. Lowering the actuary to $23 million and with money now allocated to the trust fund, "you've started the process," Roselli noted, calling the work in progress "a major step" toward securing a triple-A credit rating.

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Fraud

Citing standard practices to deter fraud, Roselli said the accountant's office should reconcile with all departments that handle cash, such as the Town Clerk's office. Does the town have a fraud policy? If not, it should, he said.

The policy would spell out what kinds of behavior constitute fraud, Roselli explained. An employee's personal use of town property, for example, such as borrowing, say, a DPW plow to clear a private driveway. Although it may not seem obvious to some, that would be fraud, he said.

So the town should create a fraud policy and send it out to all employees, he said.

Hacking

Towns are easy targets for hackers, Roselli said, since they keep a lot of sensitive data their computer systems and are not typically well protected. To raise awareness, policies should also be created to address that potential problem, he said.

Findings

Areas of concern turned up in the audit included the reconciliation process. In fact, it was the key concern, but apparently the issue was identified and is being corrected. "It's significant," Roselli said. "You must be able to reconcile cash on a monthly basis." That is, revenue and receipts must match up, every month.

"Recording was going haywire," Leonard conceded, calling the situation a "learning curve we were not aware of" and tracing most of it to employee turnover last year.

Leonard explained. The problem didn't start until 2011, she said. Before that, the books always balanced. Things got worse in 2012 due to "key personnel turnover," she said. "Now, we're in transition again, but we are committed to ensuring that all accounts balance every month."

The auditor said that's the kind of assurance he was looking for. But it may take added personnel besides. "The town is growing," he said, with larger, more complex budgets, revolving accounts. "When do you plan to up labor hours in the financial area?"

The question was probably rhetorical, but it provided food for thought. Leonard said that for now, the issue is being addressed via more efficient task allocation.

Chapter 90

Citing another area that could use improvement, Roselli said that Chapter 90 - annual state highway funding - reimbursements should be tapped into more quickly than it has been until now. If not actually used up, then targeted, at least, with projects identified. "If the DOR sees paperwork in motion, they won't reduce your free cash," he said.

The audit showed an isolated accounting error in the Community Preservation Act fund, but it was resolved, he continued.

When receivables went up at the end of the year versus the previous year, it raised the question, "did we make a full effort to collect" overdue taxes? Roselli said. The good news is that when the system ramped up, the money went into the coffers for the current year, adding extra revenue for 2013.

A $300,000 error was also found in the statement of debt sent to the DOR. That, too, was an anomaly that was traced to "movement" in the treasurer's office. "We're back at full staff now after a couple of years of issues," Leonard said.

To Do List

Student activity accounts are at risk for fraud and should be audited every three years, by a CPA if the total is above a certain amount, Roselli said. But that hasn't been done. Leonard said it would be, from now on.

Unlike other towns in the state, Harvard hasn't recouped its landfill closing costs, Roselli said. Bragan said it's in the works.

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